Insurance Losses to Exceed $30B

By JOHN CHRISTOFFERSEN
Associated Press Writer

STAMFORD, Conn. - Insurance losses from last week's attacks against the World Trade Center and Pentagon are expected to exceed $30 billion, the industry's costliest disaster ever, a rating agency said Wednesday.

Fitch Inc. said property casualty losses should reach $30 billion or more, while life insurance losses could total $3 billion to $5 billion. The agency cautioned that estimates of losses typically rise.

Claims will be shared roughly equally by insurance and reinsurance companies, Fitch said during a teleconference.

The largest insurance loss to date involved Hurricane Andrew in 1992, which generated $16 billion in losses, or $19 billion adjusted for inflation, said Fitch managing director Keith Buckley.

"If it winds up being $30 billion, it would be the largest catastrophic event the industry faced," Buckley said. "I think it's very likely to assume it will be the biggest."

Fitch officials said they expect to put 12 to 17 insurance and reinsurance companies on a rating watch in the coming days, including a few who will have their rating immediately downgraded. The others may or may not be downgraded later.

A rating tells investors and customers a company's financial strength. A rating downgrade makes it more expensive for a company to raise cash and, in the case of insurance companies, signals their ability to pay claims.

But Fitch officials said they do not want to be too alarmist either. Most downgrades will involve one notch, while the worst will be a downgrade of two levels, they said.

The industry should be able to weather the losses because it was in a strong financial condition, Buckley said. He said insolvencies are unlikely at this point and most if not all claims will be paid.

"I think we're not overly concerned," Buckley said. "But the fact that we will be putting 12 to 17 companies on rating watch does recognize that the losses are large."

Fitch would not identify the companies yet, but Buckley confirmed that some under review are in Connecticut.

Most companies do not plan to invoke an act of war exclusion in their policies to avoid paying claims, Fitch said.

Fitch officials cited some factors which could affect the level of losses, including lawsuits and the potential for business disruption claims.

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